Wall Street was set to rise sharply at the start of a holiday-shortened week on Monday on signs of progress in talks to resolve the fiscal crunch.
Leading Democratic and Republican lawmakers expressed confidence on Sunday that they could reach a deal to avert the "fiscal cliff" even as they laid down markers on raising taxes and spending cuts that may make any agreement more difficult. European stocks also reacted by rising 1/2 percent a 3 1/2-month low.
Democratic Senator Dick Durbin said on CNN, "What I hear is a perceptible change in rhetoric from the other side."
Also appearing on CNN, Republican Representative Tom Price said, "Every member of our caucus appreciates that this fiscal crisis, this challenge that we have, is ever closer." Opinion polls show that Republicans would shoulder more of the blame if the country goes over the fiscal cliff.
"A deal that doesn't face healthcare spending head on and also raises taxes of substance with economic growth mediocre is not a good deal. This said, the markets will celebrate any deal in the short term but will likely deal with the economic consequences in 2013," said Peter Boockvar, managing director at Miller Tabak & Co in New York.
S&P 500 futures rose 12.9 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures added 101 points and Nasdaq 100 futures rose 25.5 points.
U.S. financial markets will be closed on Thursday for the Thanksgiving holiday.
UBS introduced a cautious outlook with a year-end 2013 price target on the S&P 500 at 1,425.
"While the 'fiscal cliff' may be avoided, we believe that the most difficult policy issues will be pushed into the future, constraining earnings growth and stock multiples."
"Our cautious stance is predicated upon a belief that a number of macro uncertainties — the most important of which stem from long-term U.S. fiscal imbalances — will hamper earnings growth and constrain valuations in 2013," said Jonathan Golub, strategist at UBS in New York.
Investors awaited data on existing-home sales for October, due at 10 a.m. (1500 GMT). Economists in a Reuters survey forecast an annualized 4.75 million units, a repeat of the September total. Investors also eyed the November NAHB housing market index, also at 10 a.m. (1500 GMT).
Shares of Lowe's Cos Inc , the world's No. 2 home improvement chain, rose 5.5 percent to $33.73 in premarket trade on Monday after the company reported higher-than-expected quarterly profit and raised its full-year sales forecast.
Networking equipment company Cisco Systems Inc said it will buy privately held cloud networking company Meraki for $1.2 billion in cash as part of its cloud and networking strategy. Cisco shares were up 1.3 percent at $18.22 in premarket trade.
General Motors Co and its local Chinese partners, intensifying competition in China in the no-frills car market, on Sunday formally opened another plant for its low-cost Baojun brand. GM shares were up 1.5 percent at $24.20 in premarket trade.
Wal-Mart Stores Inc is taking its first legal step to stop months of protests and rallies outside Walmart stores, targeting the union that it says is behind such actions.
Citigroup Inc has agreed to pay $360 million to the brokerage estate of Lehman Brothers to resolve a dispute over $1 billion in collateral that the investment bank was forced to post in the days leading up to its bankruptcy in 2008. [ID:nnL4N08Z125] Citigroup shares were up 1.5 percent at $35.49 in premarket trade.
Hope that U.S. politicians would find common ground to steer clear of the "fiscal cliff" boosted stocks on Friday, though the gains were not enough to offset the week's losses.
(Reporting by Angela Moon; Editing by Kenneth Barry)